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Smart Grid Awakens Investment Opportunities
Earlier this month, State Grid Corporation of China (SGCC) announced that R&D of smart grid technology will start in 2010 and related infrastructure construction will be complete in 2020, with more than RMB 200 billion to be invested each year. SGCC said clean energy will be a crucial part of its smart grid plan and aims to increase the portion of electricity generated by alternative sources. The company estimates that 16% of total installed capacity will be contributed by wind, solar and nuclear power by 2020.
Smart grid is not only good news to households and environmentalists, it is also stirring up investors. Stocks of companies with a foothold in the field – including manufacturers of related equipment such as smart meters, advanced sensors and transformer substations – soared when SGCC released its big plan. Both domestic companies, such as Nari Technology Co. (600406.SH) and Henan Pinggao Electric Co. (600312.SH), and foreign players, like ABB (NYSE:ABB) and GE (NYSE:GE), are eyeing the lucrative market. Smart grid is also driving the need for electricity storage technology, and several companies in the field, including Net Power Technology, have received large investments. Massive construction endeavors also bode well for upstream materials including iron, steel and concrete. The smart-grid food chain is so extensive that various opportunities should be unveiled to careful investors in the near future.
Even search companies are among those working towards the smart-grid future. In February this year, Google (Nasdaq:GOOG) unveiled PowerMeter – an online application that can be interfaced with smart meters and thermostats to allow users to monitor home electricity consumption. Not surprisingly, Microsoft (Nasdaq:MSFT) followed suit with its own energy information management tool, Hohm, last month.
Current grid systems are unreliable, wasteful and overly coal-reliant. Smart grids attempt to change the way electricity is generated, distributed, stored and consumed in an effort to make energy consumption more visible and manageable for both utilities and consumers.
Smart grids may promise a smaller carbon footprint but truly offer a bigger case for investors.
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Ivy Cheng follows domestic investment deals and contributes to The China Report.
